How Much Student Loan Debt Should You Take On for Grad School?

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It’s one thing to determine your return on investment for graduate school. It’s another to actually come up with the cash to pay for it.

If you’ve decided to continue your education, you might be wondering how much (more) student loan debt to take on. While the easy answer probably is “as little as possible,” here’s how you can figure out the amount of federal and private loans for students you can expect to borrow.

Types of loans for students in graduate school

Before addressing how much you should borrow for graduate school, let’s review how much you could borrow.

By completing the Free Application for Federal Student Aid, you can access Direct Unsubsidized Loans provided by the U.S. Department of Education. The borrowing limit for grad students is higher than for undergrads. You can take out up to $20,500 in unsubsidized loans, or about $8,000 more per year than a college senior.

If you max out your Direct Loan allotment, other federal options and private loans are available.

At the federal level, Graduate PLUS Loans allow you to borrow up to your cost of attendance. The only extra requirement is that you or your endorser don’t have an adverse credit history.

Private lenders also let you borrow up to your program-certified cost of attendance. They consider your or your cosigner’s credit history when determining your interest rate. The better the credit, the lower the rate you could score.

How to determine your borrowing amount and repayment plan

Let’s assume you collect $5,000 in gift aid and have $5,000 in earnings from your part-time job. Any gap between those funds and your college costs could be filled with a loan.

Before you approach the Department of Education or a top private lender, understand that you likely will end up repaying much more than the amount you borrow thanks to interest accruing over the life of the debt.

Let’s say you borrow $15,000 in unsubsidized loans from the Department of Education at the 2017-2018 interest rate of 6.00%. On a standard 10-year repayment plan, you’d be responsible for a monthly payment of $167 and $4,984 in overall interest, according to our student loan payment calculator. So the real cost would be $19,984 — and that’s if you never missed a payment.

Now consider an alternative with a lower rate and repayment term. Let’s say you have a creditworthy cosigner and borrow $15,000 at a 5.00% rate from a private lender. If you choose a five-year repayment plan, you’d repay a total of $16,984 over time, thanks to lower interest charges totaling $1,984. But the shorter repayment term means your monthly payment would balloon to $283.

Before taking out federal or private loans for students, check if you can afford to pay more in interest in the long term or a bigger monthly payment in the short term. That’s the best way to figure out how much you should borrow for graduate school.

How to lower your borrowing amount

Whether you benefit more from federal or private loans, you need to understand your cost of attendance and how to pay for it.

Just because your school says you’re eligible to take out unsubsidized loans, for example, doesn’t mean you must. Instead, you could cut down your cost of attendance by living at home or finding cheaper off-campus housing. Or you could reduce the cost of books by renting or sharing digital copies.

Once you’ve confirmed your cost of attendance, explore ways to pay for graduate school that don’t include debt. For graduate and professional programs, you could consider:

  • Asking your employer for tuition reimbursement
  • Working at your university to score a tuition discount
  • Applying for fellowships via a search engine such as ProFellow
  • Starting a side hustle off campus in your spare time

The more common ways to receive financial aid for graduate school include applying for state-based grants and private scholarships.

Start your search on campus. The financial aid office should point you in the direction of aid sources that are specific to your program.

The office also could let you know whether it has a school-based credit union that offers low-interest loans. That would give you another option for loans for students entering graduate school.

Only borrow what you need and can afford to repay

Federal and private loans allow you to borrow up to the cost of attendance, but things can get hairy quickly over debt. The annual tuition alone for graduate school can range between $30,000 and $40,000, according to Peterson’s.

Just because you can borrow a lot doesn’t mean you should. Understanding your repayment plan is one of the best ways to avoid borrowing too much. Think about your long-term ability to repay the loan and whether you’ll be able to afford your monthly payments upon leaving school.

Also, consider factors such as the average salary in your future career or your potential paths to federal loan forgiveness. A future doctor who’s likely to earn six figures might feel better about borrowing for medical school, for example. And an aspiring teacher might be more comfortable about taking on debt for a master’s degree if there are loan repayment assistance programs.

To learn more about loans for students attending graduate school, consider our guide to loans for postgraduates.

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1 = Citizens Disclaimer.

2 = CollegeAve Autopay Disclaimer: All rates shown include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.